Kalvakuntla Chandrashekar Rao, who at one stage went on hunger strike as part of the push to create what is India's 29th state, was sworn in as chief minister during a morning ceremony in Hyderabad.
Residents broke into celebrations on the stroke of midnight, with a fireworks display lighting up the skies over the city.
India's new Prime Minister Narendra Modi was among the first to congratulate Rao, promising his "complete support to the people & Government of Telangana" in a message on Twitter.
"India gets a new state! We welcome Telangana as our 29th state. Telangana will add strength to our development journey in the coming years," Modi added.
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